Last Wednesday, August 24th 2022, after months of intense lobbying from the left and several delays from the administration, President Biden announced that the federal government would wipe out up to $20,000 worth of federal student loans for millions of people, likely changing higher education in America and how it’s paid for forever. It’s the largest student debt cancellation in American history, eliminating student debt entirely for millions of borrowers, a third of whom owe less than $10,000, and half of whom owe less than $20,000.
But not everyone with debt will qualify.
It’s means-tested
Biden put in place means testing for the debt forgiveness. Individuals who are single and earn under $125,000 will qualify for the $10,000 in debt cancellation, as well as those who earn under $250,000 if they are married and file their taxes jointly or are a head of household. Borrowers who meet these income requirements and received a Pell Grant could qualify for an extra $10,000 in cancellation. That’s most of them — more than 6 out of 10 federal student loan borrowers are Pell Grant recipients, according to the Biden White House. Student loans that were disbursed (paid out) after June 30th of this year are not eligible for forgiveness. Neither are private loans.
The means testing was put in place mainly (I think) because Biden wanted to ward off criticism that student debt relief was a giveaway to the already rich and wealthy (Spoiler: Republicans criticized him for that anyway because they don’t care what the details are).
But means testing comes with serious political and economic drawbacks. Means-tested benefits are often more expensive to provide, harder to sell politically, and less effective than universal social programs, and they can place both a social stigma and discouraging bureaucratic requirements on Americans in need.
Anyone who have given up trying to claw money back from health insurance companies or the government because of all the nightmarish red-tape put in place knows how layers of bureaucracy and paperwork can be a major obstacle to getting benefits.
People have a lot of questions about how the debt forgiveness will affect them and if they qualify. The NYTimes put together a good FAQ page about it that you can see here.
Ronny Reagan and student debt as a form of social control
45 million people owe $1.6 trillion for federal loans taken out for college, roughly equal to the economy of Brazil or Australia. It’s more than Americans owe on car loans, credit cards, or any other consumer debt other than mortgages.
The cost of college and the amount of debt Americans take out to pay for it has skyrocketed over the last half-century, significantly more than the increases in most other household expenses. Students today receive less government support for the cost of college than previous generations as state funding declined, leading more Americans to take out loans. More people than ever are struggling to pay their loans back. More than 7 million people — one in five borrowers with a payment due — defaulted on their loans before the pandemic.
Making college so expensive that millions of people can’t afford it — and millions more are burdened by debt for attending — is no accident. I encourage everyone to read this excellent article from The Intercept, but I’ll get across the main points for you:
In October of 1970, Ronald Reagan’s education advisor Roger A. Freeman spoke at a press conference a week before Reagan would win reelection as governor of California. His remarks were reported the next day in the San Francisco Chronicle.
According to the article, Freeman said “We are in danger of producing an educated proletariat. … That’s dynamite! We have to be selective on who we allow [to go to college].”
“If not,” Freeman continued, “we will have a large number of highly trained and unemployed people.” Freeman also said — somehow connecting students attending university in America to the rise of fascism — “that’s what happened in Germany. I saw it happen.”
Reagan’s first campaign for governor in 1966 had a core theme of resentment towards California’s public colleges, in particular UC Berkeley. He repeatedly vowed “to clean up the mess” there. At the time, Berkeley was nearly free to attend for California residents. It had also become a national center of organizing against the Vietnam War, which deeply frightened the US government. John McCone, who was then head of the CIA, requested a meeting to discuss “communist influence” at Berkeley, a situation that “definitely required some corrective action.”
During the 1966 campaign, Reagan regularly communicated with the FBI about its concerns about Clark Kerr, the president of the entire University of California system. Despite requests from Hoover, Kerr had not cracked down on Berkeley protesters. Within weeks of Reagan taking office, Kerr was fired. A subsequent FBI memo stated that Reagan was “dedicated to the destruction of disruptive elements on California campuses.”
Reagan pushed to cut state funding for California’s public colleges, saying the state needed to save money. He did not mention how much he hated student protestors when conveying this, or how he thought they were all dastardly communists. He did however suggest that California’s public colleges should charge students tuition for the first time and have student loans cover for it.
The success of Reagan’s attacks on California’s public colleges inspired conservative politicians across the US, such as President Nixon, who publicly denounced “campus revolt” as young people were protesting across the country against the Vietnam War. Spiro Agnew, Nixon’s vice president, proclaimed that thanks to college’s open admissions policies, “unqualified students are being swept into college on the wave of the new socialism.”
Well we can’t just allow that now can we?
What is one conservative group of politicians to do when the working-class student population they wish to subdue is having their expectations raised for what a society can aspire to be through these darn public universities? A system of tuition payments and loans to be paid back out of students’ future incomes, of course.
For decades, there had been enthusiastic bipartisan agreement that states should fund high-quality public colleges so that young people could receive higher education for free, or so affordably that it would be close to free. That is no longer the case, and there’s often a gaping void in American politicians’ psyches where a duty to serve the public good should be. Student debt increased during the Reagan administration and later shot up after the Great Recession as states made huge cuts to funding higher education.
You could argue that state funding cuts to colleges during the Great Recession had less to do with quelling protestors and much more to do with the fact that almost everyone everywhere was running out of money all at once, but seeing where and how student debt really took off in this country is still very enlightening.
But don’t get me started on what the military does.
There’s a lot more to talk about with student loans and the debt forgiveness Biden is implementing, like:
how much student debt impacts someone’s life varies widely depending on their age and race
how Biden’s program would cap monthly payments on undergraduate federal loans to 5% of a borrower’s discretionary income, down from the typical 10%
how some of President Obama’s neoliberal economic advisors are speaking out against one of President Biden’s most widely popular actions to date
how conservative politicians only cry out about the deficit when there’s a Democrat in the White House and it’s being discussed how money could be spent to help working-class people instead of wealthy corporations
how some economists say broad loan forgiveness could increase US real GDP by $86 billion to $108 billion per year
Hopefully we’ll get to at least some of those points in the future. The media is still digging through all the details and implications of what Biden’s student debt forgiveness will mean for us.
More soon!